For the past few years, there has been a lot of talk about the death of the personal computer. Soon there will be a world where everyone will hold nothing but their smartphones, tablets and wrist computers. That itself sounds so science fiction not that long ago.
I agree, personal computer sales are slowing as more and more consumers migrate across to the mobile world of smartphones and tablets, but from observation as well as from personal experience, these new gadgets are just an extension of the desktop or notebook computers we currently still use to complete our work, our research, and our children’s homework.
I personally have a desktop pc, two notebooks, a tablet, as well as the smartphone. Even students in schools and colleges all around the globe continue to embrace Apple Mac notebooks and desktops which also comprise of the Intel core processors. They likely also have a tablet and smartphone, but homework and research is not done there.
Having said all this, an opportunity therefore exist today to purchase stock of the leading designer and manufacturer of digital technology platforms; Intel Corporation (INTC).
Hot off the press is the recent news release that Intel and Micron Technology (MU) have just jointly developed a new breed of memory chips that can bring dramatic performance improvements of almost 1000 times faster than current NAND chips, to computers, smart phones and other high tech gadgets. Intel is here to stay.
I love a bargain, whether it is in a supermarket or the stock market, especially when a fundamentally strong global brand (currently ranked 30th globally by SyncForce) with almost monopolistic like qualities, is oversold based on both fundamental and technical criteria’s.
The following is what makes me want to add Intel to my long-term portfolio over the coming days. I already hold some Intel. Here I will get straight to the point, as I believe it makes for efficient decision-making.
Please note, I am both a long-term deep value investor as well as a medium-term trader who utilizes the combination of both fundamental and technical analysis to form a view of every investment I make. Doing so I believe leads to low risk and superior market beating returns over the long run.
Fundamental Factors;
The Bad
Forecasted weak Earnings per Share growth (EPS).
The Good
Valuation of $30-$33 (approx.) based on adjusted discounted cash flow analysis, so INTC is undervalued at current prices.
Earnings per share (EPS) has been good for the past 5 years.
Return on Equity (ROE) of over 20% is more than satisfactory.
Net Debt to Equity (D/E) of 23%.
Long-term cash flow relative to reported profits is strong.
And long term funding surplus.
Technical Factors;
The Bad
Clearly broken the $29 and $30 key price support levels.
Currently below both 50 and 200 day moving averages.
Seems to follow a confirmed down trend line.
The Good
The stock is clearly oversold on a variety of momentum indicators and buying volume seems to be increasing at these prices.
It is more than likely that value seeking fund managers like myself are coming in to take advantage of these depressed prices.
Other Factors
For longer-term investments, I generally like to see who else is on-board with me and where the smart money has found its home.
In my opinion, actions always speak louder than words.
In this case, SEC filings report the following world-renowned deep value investors holding significant stakes in Intel.
Michael Price 7.66% of funds managed
Mark Hillman 2.8% of funds managed
Bill Nygren 2.15% of funds managed
Conclusion
Intel is currently undervalued and temporarily out of favour but it is a fundamentally strong company with monopolistic characteristics and smart money support.
I will be personally adding more Intel into our long-term portfolio over the coming days.
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